Netflix Execs Say No Worries As Spending Rises “Dramatically” For Original Shows, And Maybe Movies

Many investors fear that Netflix is committing too much cash to original productions — but Chief Content Officer Ted Sarandos told analysts this evening not to fret: While his recent project commitments will take spending on original programming “up pretty dramatically,” they will still account for less than 10% of Netflix’s total content costs. “Keep in mind, it is within the forecasted content spend, not in addition to.” He also talked up the benefits of series including House Of Cards and Orange Is The New Black. “The audience for those shows is continuing to grow, as we hoped.” And he has seen “nice spikes” over the last few months as they’ve attracted awards attention. Netflix has added director commentary to House Of Cards, and Sarandos noted that many subscribers are re-watching the series ahead of its second season which will become available next month. The all-at-once release strategy doesn’t result in diminished interest on social media, he adds. For example, Google Trends showed that with House Of Cards and a similar serialized thriller out at the same time, FX’s The Americans, “week over week over week there was more chatter” about Netflix’s show. Sarandos wouldn’t confirm or deny Netflix’s aspiration to also produce big budget movies, but reiterated his case for entering the business. “To consumers, the line between a movie and TV is getting pretty blurry,” he says. “We want to make compelling content in multiple formats.” Netflix has an incentive to make movies that it could air early on, without having to wait about a year before it’s through in theaters and home video. “Maybe the most effective way to do that is to do it yourself.”

Netflix execs said that, with so many attractions competing for consumers’ time, they’re unfazed by recent developments that could empower video competitors. That includes Verizon which just bought Intel’s OnCue virtual pay TV technology. “We try to game out: What do they think they’re doing there?” CEO Reed Hastings says. “And we haven’t come up with anything that’s earth shaking. The earth shaking stuff is more like Aereo, depending on what happens there” as the U.S. Supreme Court prepares to weigh broadcasters’ claim that the streaming service infringes on their copyrights. Hastings took a mild jab, though, at HBO chief Richard Plepler who recently told an interviewer that he didn’t mind if subscribers shared their log-in information for HBO GO. “I guess Plepler doesn’t mind me sharing his account information,” Hastings said. “It’s Plepler @HBO.com.”

That batch of episodes they did was very hit or miss. I think the magic is gone.

Feedback • on Jan 22, 2014 3:59 pm

I think it’s time Netflix Studios becomes a thing.

Lawrence Meyers • on Jan 22, 2014 3:59 pm

NFLX generated $112MM in operating income for all of FY13.
It has $1.2 billion of cash on hand, and $7.3 billion in content obligations.
It cannot generate nearly enough from operating cash to make good on those obligations.
Even if those fees are renegotiated, millions of subscribers are added, sub fees increased, NFLX will never, ever become an operation that generates cash for any other reason to continue paying for content. It will always be sucked dry.
At 200x operating cash flow, the stock is insanely overvalued.

Anonymous • on Jan 22, 2014 3:59 pm

Awesome news for Netflix, but not unexpected if you have even the slightest idea of how EVERYONE under the age of 30 now gets their content.

Michael • on Jan 22, 2014 3:59 pm

Spacey was great, but otherwise House of Cards was a place imitation of the BBC version.